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Town of Oro Valley
Study Session
Proposed Water Rate Increase
April 9, 2008
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Financial Considerations
Financial Analysis & Assumptions
Preferred Financial scenario
Customer Billing Analysis
Alternate Financial Scenario
is Customer Billing Analysis
Comparison of Scenarios
Review of Process
Review of Schedule
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Financial Considerations
Analysis of three funds within the Utility
Enterprise, AWRDIF and PWSDIF
Mayor & Council Water Policies
Debt service coverage ratio of 1.30
Cash reserves of 5% of budget
Minimize rate shock
Existing cash reserves
Capital expenditures
American Water Works Association rate
setting principles & methodology
Financial Analysis
Prepared Water Rates Analysis Report
— 5 year revenue and expense projections
— Key assumptions
Growth, reclaimed system, existing &future debt
Tucson Water increase for reclaimed water
Tucson Electric rate increase
CAP water delivery system &operating costs
— Phase-in Groundwater Preservation Fee over 5 years
— Levelize rate increases in future years
Minimize rate shock
Review by Red Oak Consulting
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Preferred: Financial Scenario
5% increase in base rates & commodity rates
for potable and reclaimed
Adjust usage in tiers for various meter sizes
Increase potable construction water rate from $6.00 to
$6.25 per 1,000 gallons
Increase reclaimed construction water rate equal to
reclaimed commodity rate
Increase Meter Fees
Establish $1.50 Convenience Fee for credit card
transactions by telephone and/or by mail
Preferred Financial Scenario
Increase Groundwater Preservation Fees
— Potable customers $0.15 increase per 1,000 gallons
(from $0.40 to $0.55)
— Reclaimed customers $0.05 increase per 1,000
gallons (from $0.25 to $0.30)
Groundwater Preservation Fee is based on the
sustainable groundwater production and the
balance between existing customers and new
growth
3
Customer Analysis
Preferred Financial Scenario
Residential customers with 5/8" meter averaged 9,000
gallons per month last year
Based on this usage, customers would pay $2.99 per
month more (8.1% increase)
— $1.64 in water use charges
— $1.35 in increased GPF charges
Residential customer using 7,000 gallons or less would
pay between $0.66 and $2.41 more (5.0%-7.9°io increase)
Residential customer using between 8,000 - 16,000
gallons would pay between $2.70 and $5.02 more
(8.0%-8.4% increase)
Alternate Financial Scenario
2.5% increase in base rates & commodity rates
for potable and reclaimed
Adjust usage in tiers for various meter sizes
Increase potable construction water rate from
$6.00 to $6.13 per 1,000 gallons
Increase reclaimed construction water rate
equal to reclaimed commodity rate
Increase in Meter Fees, Groundwater
Preservation Fees and the Convenience Fees
are the same as the Preferred Financial
Scenario
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Customer Analysis
Alternate Financial Scenario
Residential customers with 5/8" meter averaged 9,000
gallons per month last year
Based on this usage, customers would pay $2.17 per
month more (5.9% increase)
— $0.82 in water use charges
— $1.35 in increased GPF charges
Residential customer using 7,000 gallons or less would
pay between $0.33 and $1.73 more (2.5% -5.7°io increase)
Residential customer between 8,000 - 16,000 gallons
would pay between $1.95 and $3.71 more (5.8% -6.2°io
increase)
Comparison of Scenarios
FY 2008-2009 Preferred Alternate
SFR — 5/8" meter 9,000 Gals. 9,000 Gals.
Water Rates 4.4% 2.2%
GPF 3.7% 3.7%
Total Impact 8.1% 5.9%
Monthly Bill $40.02 $39.20
Monthly Increase $ 2,99 $ 2.17
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Review of Process
Notice of Intent to increase water rates
— Does not set water rates
— Establishes Public Hearing date for consideration of rate increase
— Provides Rate Report for public review
— Rate report establishes the highest increase that may be adopted
Council has option to adopt that rate or any rate lower
Formal notice of the Public Hearing in newspaper
— Utility mails notice of Public Hearing to all customers
— Publish in Oro Valley Vista &the Utility's web site
Council holds Public Hearing 30 days after the Notice of
Intent is adopted & considers proposed rates
New rates become effective 30 days after adoption
Review of Sc
1/10 WUC — Finance Subcommittee
1/14 WUC —Water Rates Discussion
2/11 WUC —Water Rates Discussion
3/04 WUC — Finance Subcommittee
3/10 WUC —Water Rates Discussion
3/26 WUC — Finance Subcommittee
4/09 Town Council Study Session on Rates
4/14 WUC — Final Review and Recommendation
4/16 Town Council — Consider Notice of Intent
4/25 Notice of Intent published
5/02 Mail Public Hearing notice to customers
5/21 Public Hearing to consider rate increase
6/20 If adopted, new water rates are effective
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Oro Valley Water Utility
Questions & Answers
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